Legal & Regulatory
State Governments Seek to Regulate Taxi Aggregators
Last week Karnataka became the first state to introduce state-prescribed fares for taxi aggregators. In addition to set fares, taxis will have to fix digital meters with printers and register themselves with local transport authorities. Maharashtra, with two of the largest taxi hailing markets – Mumbai and Pune – is set to follow this example. According to a source in the Maharashtra state government, their proposed rules go beyond the scope of Karnataka’s. These will include fare determination based on the cost of the vehicle and its engine capacity; regulation of taxi numbers through an induction schedule, which could adversely impact the employment of driver partners of taxi aggregators; and the ability to cancel licenses for non-compliance.
Different states have responded differently to the entry of transport aggregators. For instance, both Uber and Ola have capitalized on the Delhi government’s call for car sharing as the city struggles to combat its high pollution. Ride sharing services were introduced in Delhi in January with no government resistance, unlike in Karnataka.
The taxi hailing market in India was US $1 billion in annual gross booking value in February 2016 according to RedSeer Management Consulting. This is why Uber and Ola have so far focused on undercutting each other’s pricing to build their respective customer bases. Strict regulation of taxi prices will hurt their business strategies, though benefiting customers in the long run.
By: Tracie Frost
According to a study by PricewaterhouseCoopers and The Associated Chambers of Commerce and Industry of India, India’s e-commerce industry could experience a compounded annual growth rate of 35 percent and reach US $100 billion in annual sales over the next five years. The sector is estimated to realize a 72 percent jump in annual online purchases per individual in 2016. Additionally, the number of consumers purchasing something online has been increasing by 60 percent or more year over year.
The opportunity for continued growth in India’s e-commerce industry is substantial. A young population, rising standards of living, better internet penetration, and improved infrastructure for deliveries make e-commerce a tempting investment. However, anyone contemplating investing in India’s e-commerce sector should carefully consider the many constraints on the industry, the lack of clarity with respect to regulatory guidelines, and India’s political environment.
Government Retracts Pension Tax Introduced in Budget
Indian Finance Minister, Arun Jaitely, has withdrawn a proposal aimed at taxing withdrawals beyond 40 percent of the Employment Provident Fund (EPF) corpus in the Union Budget for 2016-17. Jaitely initially argued that this would discourage full withdrawals and help create a pension society in India. Taking salaried tax payers by surprise, the government was almost immediately inundated with heavy criticism from all political quarters. Assessing this overwhelmingly negative feedback, and with the fear it would hold up key legislation stated for the Budget session, the Prime Minister’s Office (PMO) recommended the complete withdrawal of the proposal. The Labor Ministry also stated its opposition to any kind of taxation on the EPF after coming under fire from trade unions and opposition parties.
In response to the public review, the finance ministry has rolled back both its decisions – to tax EPF withdrawals and the proposal to limit tax-free contribution by the employer to the EPF to US $2270 (Rs 1.5 lakh) per annum. Additionally, the proposal to offer 40 percent rebate on the already taxable National Pension System (NPS) stays in place, bringing relief to NPS subscribers.
By Dezan Shira & Associates
Editor: Tracie Frost
When Finance Minister Arun Jaitley released the 2016 Union Budget on February 29, the response was mostly positive. The budget aims to stick to the 3.5 percent fiscal deficit target, addresses pressing social and infrastructural needs, and, for the most part, uses reasonable assumptions to forecast India’s growth over the next three years.
The Modi government has consistently focused on increased ease of business, opening markets to foreign investment, building India’s industrial sector, and improving transparency in taxation and regulation. While this budget delivered more on rural and infrastructure spending, it certainly includes some business elements that are worth exploring in detail.
By Rohit Kapur
India Country Manager, Dezan Shira & Associates
Finance Minister, Arun Jaitley has presented his third Union Budget for the fiscal year 2016-17. He started his speech by saying that, inspite of headwinds faced on account of a slowing global economy, Indian GDP growth is amongst the highest in the world at 7.6 percent. Affirming that the economy is on the right track, Jaitley cited the Consumer Price Index (CPI) which shows inflation down to just 5.4 percent from a pervious high of 9.4 percent. With inflation under control, the central Reserve Bank of India (RBI) is likely to reduce the lending rates and thus give an impetus to production and consumption.
Government Clarifies Definition of Start-ups
The Department of Industrial Policy & Promotion (DIPP) issued a clarification on the government’s definition of start-ups in India. This is to standardize norms for ventures seeking eligibility for benefits under the Start-up India Action Plan.
According to DIPP guidelines, a venture is qualified as a start-up for up to five years from the date of its registration and if the firm’s turnover is less than US $3.7 million (Rs 25 crore). The firm must then be licensed as a start-up by the Inter-Ministerial Board of Certification to qualify for tax breaks and other benefits. The certification process will assess the following criteria as put forth by the DIPP – innovation, development, commercialization of new products, processes or services driven by technology or intellectual property.
Towards this, the start-up must submit an application on the mobile application or online portal of the DIPP. It should be supported by documents verifying that funding is not less than 20 percent in equity by an incubation fund, angel investor, or private equity fund that is duly registered with the Securities and Exchange Board of India (SEBI).
By: Dezan Shira & Associates
Editor: Kimberly Momin
The Department of Industrial Policy & Promotion (DIPP) is an important government organization that promotes and regulates industrial growth and production in India. It falls under the aegis of the Ministry of Commerce and Industry. Established in 1995, the DIPP was merged with the Department of Industrial Development in 2000.
Maharashtra Government to Provide 250 Services Online by August 2016
As per the Maharashtra Chief Minister Devendra Fadnavis, the state’s government will offer 250 services online by 15 August 2016. This is part of the campaign for Digital India and the state’s ambition to increase the ease of doing business through efficient digital governance. The online portal – ‘Aaple Sarkar’ – currently provides 150 online services. It will function as a platform where citizens can register complaints and send forth suggestions to the government.
Additionally, the Maharashtra government provides a single electronic window clearance system – prospective businesses will now require 26 permissions from a single electronic window instead of pursuing a 1 to 3 year process of gaining 76 permissions. Fadnavis further highlighted the state’s plans to set up start-up warehouses in partnership with the National Association of Software and Services Companies (NASSCOM). These initiatives seek to establish Maharashtra as a digital state by 2019.